What is a blockchain? And why is it so important for the future of business and commerce in the urban environment of the future? Basically, the blockchain is a decentralized ledger that records exchanges of elements of value agreed upon by a buyer and seller.
For example, suppose Al and Bob agree on a transaction for Al to purchase Bob’s house. The agreement is then entered into the ledger, which keeps a digital copy of the sales agreement. At the same time, copies of the ledger are immediately updated to include Al and Bob’s transaction. These copies are then stored in real time on hundreds of thousands of servers worldwide. Moreover, there is no central authority governing this constellation of servers; hence, there is no authority that can oversee the transaction between Al and Bob. So there is no authority to interfere with the peer-to-peer deal between the two parties, or for that matter, to serve as a trusted intermediary between Al and Bob. Rather, the trust is established by means of an encrypted consensus created via “smart” coding.
So what the blockchain represents is the next stage of the Internet. Instead of an Internet of information, the blockchain is an Internet of value. It allows the exchange of any item of value—money, physical property, legal agreements—eliminating the need for a middleman to broker the deal. So, in principle, no more banks, no more notaries, no more trusted third parties. This also implies that platform firms like Uber, Airbnb, Amazon and the like, which trade completely on the basis of excess capacity, brokering a connection between a party who has that excess capacity and someone who wants to buy it, will eventually disappear. In principle, blockchain technology can eliminate all such intermediaries and link the buyer and seller directly.
How can the blockchain change the way business is done in the urban setting? Consider just the case of blockchain technology in urban governance. Here the blockchain can be used for
- Record keeping and public archives
- Fraud-free voting
- Smart contract administration
- Distributed decision-making
- Tamper-free registries
In fact, the blockchain has already been used to create a totally secure land registry in Ghana, transparency to allocation of city budgets in London and for monitoring and serving public health needs and distributed energy management in Australia and elsewhere.
Coupling the Internet of Things with blockchain technology opens up the possibility of creating smart cities where connected heating systems better control energy use and connected traffic lights better manage rush hour; manufacturers, retailers, regulators and transport firms have real-time data from sensors imbedded on products, ships, trucks, everyone in the distribution chain benefits from insights they could never obtain before; companies can be assured that their valuable data on the blockchain cannot be hacked.